Invested Assets

6 Months Ended

Jun. 30, 2014

Text Block [Abstract]

Invested Assets

2) Invested Assets

(a) The amortized cost and fair value of fixed maturities and equity securities were as follows:

	June 30, 2014
	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value
	(in millions)
Fixed maturities
Tax exempt	$	18,168	$	1,088	$	36	$	19,220
Taxable
U.S. government and government agency and authority obligations		1,245		43		2		1,286
Corporate bonds		8,809		405		20		9,194
Foreign government and government agency obligations		6,682		236		13		6,905
Residential mortgage-backed securities		229		22		1		250
Commercial mortgage-backed securities		1,180		28		1		1,207
		18,145		734		37		18,842
Total fixed maturities	$	36,313	$	1,822	$	73	$	38,062
Equity securities	$	1,106	$	878	$	15	$	1,969

	December 31, 2013
	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value
	(in millions)
Fixed maturities
Tax exempt	$	17,808	$	802	$	189	$	18,421
Taxable
U.S. government and government agency and authority obligations		784		27		9		802
Corporate bonds		9,032		370		88		9,314
Foreign government and government agency obligations		6,719		206		35		6,890
Residential mortgage-backed securities		277		23		1		299
Commercial mortgage-backed securities		1,339		29		3		1,365
		18,151		655		136		18,670
Total fixed maturities	$	35,959	$	1,457	$	325	$	37,091
Equity securities	$	1,057	$	756	$	3	$	1,810

The fair value and amortized cost of fixed maturities at June 30, 2014 by contractual maturity were as follows:

	Fair Value		Amortized Cost
	(in millions)
Due in one year or less	$	1,967	$	1,946
Due after one year through five years		14,182		13,577
Due after five years through ten years		12,348		11,661
Due after ten years		8,108		7,720
		36,605		34,904
Residential mortgage-backed securities		250		229
Commercial mortgage-backed securities		1,207		1,180
	$	38,062	$	36,313

Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations.

The Corporation’s equity securities comprise a diversified portfolio of primarily U.S. publicly-traded common stocks.

The Corporation is involved in the normal course of business with variable interest entities (VIEs) primarily as a passive investor in residential mortgage-backed securities, commercial mortgage-backed securities and private equity limited partnerships issued by third party VIEs. The Corporation is not the primary beneficiary of these VIEs. The Corporation’s maximum exposure to loss with respect to these investments is limited to the investment carrying values included in the Corporation’s consolidated balance sheet and any unfunded partnership commitments.

(b) The components of unrealized appreciation or depreciation, including unrealized other-than-temporary impairment losses, of investments carried at fair value were as follows:

	June 30 2014		December 31 2013
	(in millions)
Fixed maturities
Gross unrealized appreciation	$	1,822	$	1,457
Gross unrealized depreciation		73		325
		1,749		1,132
Equity securities
Gross unrealized appreciation		878		756
Gross unrealized depreciation		15		3
		863		753
		2,612		1,885
Deferred income tax liability		914		660
	$	1,698	$	1,225

The following table summarizes, for all investment securities in an unrealized loss position at June 30, 2014, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
	(in millions)
Fixed maturities
Tax exempt	$	441	$	5	$	1,069	$	31	$	1,510	$	36
Taxable
U.S. government and government agency and authority obligations		510		—		36		2		546		2
Corporate bonds		502		2		1,097		18		1,599		20
Foreign government and government agency obligations		465		2		500		11		965		13
Residential mortgage-backed securities		2		—		6		1		8		1
Commercial mortgage-backed securities		55		—		40		1		95		1
		1,534		4		1,679		33		3,213		37
Total fixed maturities		1,975		9		2,748		64		4,723		73
Equity securities		62		15		—		—		62		15
	$	2,037	$	24	$	2,748	$	64	$	4,785	$	88

At June 30, 2014, approximately 570 individual fixed maturities and 10 individual equity securities were in an unrealized loss position. The Corporation does not have the intent to sell and it is not more likely than not that the Corporation will be required to sell these fixed maturities before the securities recover to their amortized cost value. In addition, the Corporation believes that none of the declines in the fair values of these fixed maturities relate to credit losses. The Corporation has the intent and ability to hold the equity securities in an unrealized loss position for a period of time sufficient to allow for the recovery of cost. The Corporation believes that none of the declines in the fair value of these fixed maturities and equity securities were other than temporary at June 30, 2014.

The following table summarizes, for all investment securities in an unrealized loss position at December 31, 2013, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
	(in millions)
Fixed maturities
Tax exempt	$	3,417	$	144	$	307	$	45	$	3,724	$	189
Taxable
U.S. government and government agency and authority obligations		213		6		35		3		248		9
Corporate bonds		2,526		76		222		12		2,748		88
Foreign government and government agency obligations		1,735		32		75		3		1,810		35
Residential mortgage-backed securities		4		—		14		1		18		1
Commercial mortgage-backed securities		153		1		39		2		192		3
		4,631		115		385		21		5,016		136
Total fixed maturities		8,048		259		692		66		8,740		325
Equity securities		41		3		—		—		41		3
	$	8,089	$	262	$	692	$	66	$	8,781	$	328

The change in unrealized appreciation or depreciation of investments carried at fair value, including the change in unrealized other-than-temporary impairment losses, was as follows:

	Periods Ended June 30
	Second Quarter					Six Months
	2014		2013			2014		2013
	(in millions)
Change in unrealized appreciation of fixed maturities	$	255		$    (1,019	)	$	617	$	(1,215	)
Change in unrealized appreciation of equity securities		111		(57	)		110		145
		366		(1,076	)		727		(1,070	)
Deferred income tax (credit)		128		(376	)		254		(374	)
	$	238	$	(700	)	$	473	$	(696	)

(c) Realized investment gains and losses were as follows:

	Periods Ended June 30
	Second Quarter						Six Months
	2014			2013			2014			2013
	(in millions)
Fixed maturities
Gross realized gains	$	69		$	14		$	77		$	27
Gross realized losses		(17	)		(8	)		(28	)		(10	)
Other-than-temporary impairment losses		(4	)		—			(4	)		—
		48			6			45			17
Equity securities
Gross realized gains		23			119			89			174
Other-than-temporary impairment losses		(1	)		(5	)		(1	)		(7	)
		22			114			88			167
Other invested assets		55			59			108			133
	$	125		$	179		$	241		$	317

(d) As of June 30, 2014 and December 31, 2013, fixed maturities still held by the Corporation for which a portion of their other-than-temporary impairment losses were recognized in other comprehensive income had cumulative credit-related losses of $19 million and $20 million, respectively, recognized in net income.